"We are considering (a bid). The possibility of a takeover
plan going ahead is very big," he said in an interview with
21st Century Business Herald, adding that it was important for
the firm to have its own mines.

Asked about the price of a possible deal, he said: "200
billion is probably not enough."

A bid by Baosteel would challenge an all-share takeover
proposal from BHP Billiton <BHP.AX><BLT.L>, whose chief
executive has toured China, South Korea and Japan in an attempt
to garner support from the region's steelmakers.

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"Rio's assets, particularly in iron ore, are very valuable
and will attract interest from any number of interested
parties," said mining analyst James Wilson of DJ Carmichael &
Co in Perth. "Whether they can actually buy them is another
story."

Rio Tinto declined to comment on the report. A supervisor
at Baosteel Group's publicity department said he was not aware
of any talks that would link Baosteel with a bid for Rio Tinto.

Shares in Chinese steelmakers rose on the report, with
Baoshan Iron and Steel Co <600019.SS>, a unit of Baosteel, up
5.15 percent to 15.52 yuan by midday. But Rio Tinto shares were
down 2.59 percent at A$143.10.

In response to steelmakers' concerns that a merger would
give the combined company too much clout on pricing,
particularly in iron ore, BHP Chief Executive Marius Kloppers
last week said the market, not BHP, would set prices and
dismissed speculation that China might launch its own bid for
Rio using its well-heeled sovereign funds.

Chinese industrial firms are scouring the outback in search
of Australian mining companies willing to swap equity for cash
to fund exploration and development. But none are on a scale of
the sort that it would take to acquire Rio.

China's steel groups have so far kept investments in
Australia largely to yet-to-start projects, such as Fortescue
Metals Ltd <FMG.AX>.

Rio and BHP are the dominant iron ore miners in Australia's
Pilbara region, the world's single largest deposit, shipping
hundreds of millions of tons annually to steel mills in Japan,
Korea and increasingly China.

Another report on Tuesday quoted an executive at steel firm
Shougang as saying the government and major steelmakers were
studying a joint bid for Rio Tinto.

But the report, published by Bloomberg News, was denied by
a Shougang executive, who said the report was incorrect.

"Shougang is not involved in, and will not be involved in,
any joint bid for Rio Tinto Group," Tan Yixin, general manager
of China Shougang International Trade and Engineering Corp
Mineral Import and Export Co, told Reuters. "The company is not
aware of any joint bid among steelmakers in China for Rio Tinto
Group."

Asked about the reports, Qi Xiangdong, a deputy secretary
general with the China Iron and Steel Association, told
Reuters: